Air New Zealand launches $2.2 billion recapitalisation package to repay loan, improve liquidity

Air New Zealand has launched a $2.2 billion equity and debt package to repay its existing Crown loan, strengthen its balance sheet, improve liquidity and help position the airline for recovery.

Existing shareholders will be able to buy two shares for every one they have for 53c - a massive 61 per cent discount to its current share price, which the airline's chair Dame Therese Walsh said was arrived at after comparison to other discount rates in the market.

When trading was halted on Wednesday afternoon Air New Zealand shares were trading at $1.375.

By taking up their rights in full, eligible shareholders will maintain their same level of shareholding, the airline says.

If an eligible shareholder decides not to take up their rights in full, their original shareholding will be diluted. However, eligible shareholders will have the opportunity to sell their rights on the NZX during a rights trading period.

The recapitalisation package would allow the airline to pay back $850 million of its Government loan and provide $950m of liquidity to help the airline move through its phases of "survive, revive and thrive".

There will be intense interest in the airline's performance on the NZX and it said its share price is expected to "reset" in response to the company's rights offer.

The package is made up of three parts:

• A $1.2 billion pro rata renounceable rights offer, allowing eligible shareholders an opportunity to buy additional shares in Air New Zealand at a discount to the prevailing share price. The Crown has committed to supporting the offer and will participate in the rights offer to retain a 51 per cent shareholding in the airline.

• $600 million in redeemable shares to the Crown, around $400m of which the airline intends to refinance through about $600m in debt markets issuance that will be undertaken by June 30 this year.

• There will also be a new $400m Crown loan to replace the existing Crown loan facility, which is available to the airline through to January 2026, and will give the airline extra flexibility if needed, Walsh said.

The airline is not expecting to pay a dividend until 2026.

"While there will still be bumpy skies ahead over the next few years, the moment is right for Air New Zealand to raise equity, recapitalise its balance sheet and repay the loan it received from the Crown during the Covid crisis. This is an important step in refuelling for our recovery," said Walsh.

The airline's chief executive, Greg Foran, said the airline is now focused on growing its domestic network, optimising its international routes and streamlining its fleet to more efficient and sustainable aircraft. Its Airpoints programme was being revamped and would be part of the airline's recovery.

"The last two years haven't been easy for our shareholders with the suspension of our dividend payments since 2020 and the decrease in equity reserves," said Foran.

"Our shareholders have been top of mind as we took action to help mitigate the impact of the pandemic while positioning the airline to survive, then revive and finally thrive in the years to come."

Today it resumed flights between Auckland and Singapore and has about 40 per cent of its international network operating. As border rules are relaxed, it also faces growing competition from other airlines which are announcing restart dates.

The airline said today that it is on target for a full-year pre-tax loss of less than $800m, a brighter outlook than the excess of $800m it forecast last month.